Walmart is betting inflation will push customers to join the subscription service

Walmart launched its subscription service, Walmart + in 2020. It has added perks, including deeper gas discounts and free access to Paramount +.


Americans have tons of season tickets.

Even with inflation, Walmart thinks it’s willing to pay for another one.

Walmart’s subscription service is Walmart +. The program includes benefits such as free shipping for online purchases, free store delivery, and gasoline discounts. It debuted in September 2020, a time when many shoppers were trying to avoid stores due to Covid-19.

Two years later, the retailer is faced with a very different scenario. Walmart’s e-commerce growth rate has slowed. More shoppers have returned to stores, and others are skipping discretionary shopping as they spend more on food, rent and other necessities.

Now, Walmart will have to prove that its subscription service can grow in a tougher climate.

Chris Cracchiolo, head of Walmart +, said subscriptions and renewals to the service have remained stable over the past few months. Service members tend to be younger, more tech-savvy, and more affluent than the typical Walmart shopper.

However, he said Walmart + has also attracted many budget-constrained consumers – about 1 in 4 Walmart + members receive government-provided food assistance benefits.

These demographics could be a promising sign for Walmart + as it navigates a segment that quickly separates winners from losers.

Sea of ​​subscriptions

Some subscription services struggle to build customer loyalty. Netflix and the Stitch Fix personal styling service are among the companies that have lost customers. At the same time, club memberships have gained momentum. Costco continued to attract new members, and Walmart-owned Sam’s Club had a record number of members. Sam’s Club does not disclose the number of members.

The company believes Walmart + is more like a club membership, which shoppers use to stock up on essential items, than a streaming service that subscribers can ditch at the end of a favorite show’s season and then renew at the end of the season. return of the series.

Cracchiolo, an American Express veteran, said Walmart + is positioned to grow even at a time when Americans have tighter budgets and are weighing the risk of a recession.

The large retailer is leaning on value-oriented advantages as inflation is at an almost four-decade high. These include higher gas discounts and new digital coupons, which skew Walmart + towards the club category. In August, he added Walmart Rewards, an exclusive program for Walmart + members that allows them to save on items and apply those savings to future purchases. Then, in September, members started getting free access to Paramount +.

It already included grocery benefits, such as free home delivery on orders of $ 35 or more.

Even before inflation put pressure on portfolios, some market research firms pointed to Walmart +’s slow membership gains, especially when compared to competitor Amazon Prime.

The Walmart + membership count has fluctuated between 11 million and 11.5 million in the past three quarters, according to market researcher Consumer Intelligence Research Partners estimates based on quarterly consumer surveys and industry research. This translates to roughly 25% of Walmart’s online shoppers.

Amazon Prime, which debuted in 2005, has approximately 168 million members in the United States as of June 30, according to CIRP. About 70% of its online shoppers are members, according to the firm’s estimates.

Walmart did not disclose a subscriber count. However, its leaders said in a recent earnings call that Walmart + has been adding paying members to the program every month since its September 2020 launch.

‘This is the moment we move forward’

Walmart could offer additional benefits during the holiday season as well, such as early and exclusive access to cool items like video game consoles. The company didn’t announce its Walmart + vacation plans, but last year offered Walmart + members the first deals discounts.

The retailer has decided to broaden its customer base – Walmart’s reputation as a discount store has attracted higher-income shoppers in recent months. About three-quarters of Walmart’s grocery market share earnings came from customers with annual household income of $ 100,000 or more in the quarter ended July 31.

That dynamic will also boost Walmart + membership, Cracchiolo said.

“This is where Walmart shines,” he said. “This is what we do best. When there is uncertainty, when there is inflation, when customers have really tight budgets. This is where we step forward. And Walmart + membership is on steroids. . What we are seeing are more customers actually seeing the need. “

He said busy families are the primary demographic for Walmart +, a profile that fits around 50 million households in the United States. Clients in the program spend about twice as much as non-members, she added. Plus, earn from subscription fees. Members pay $ 12.95 per month or $ 98 on a yearly basis.

Its members fill larger baskets, visit its stores and website more frequently, and shop across multiple departments, he said.

“For us, it’s about developing a relationship with a customer where it’s not just a transaction,” he said. “The more we can offer customers that help them in their daily life, the more we build that emotional connection with the customer.”